In the meantime, the DRC are marching on with significant recommendations, that may increase pressure on our government to take a tougher stance.
A government panel in the Democratic Republic of Congo will recommend 61 of the nation`s agreements with mining companies, including Freeport-McMoRan Copper & Gold Inc, be renegotiated or cancelled, the group`s chairman said. The commission will recommend that 38 contracts be changed, including those of Freeport and Nikanor plc, Alexis Mikandji, chairman of the commission for the review of mining contracts, said on November 2 in a telephone interview from Kinshasa. The panel will say 23 contracts should be cancelled, he said.You can read more here.
Mining firms are in the dark as DRC reviews 61 contracts
ReplyDeletePresidential commission to assess whether licences are fair to country
November 5, 2007
By Brett Foley and Franz Wild
New York - Nikanor, the company developing the largest copper mine in the Democratic Republic of Congo (DRC), has yet to hear from a government panel proposing to renegotiate or cancel some mining licences in the country.
The commission for the review of mining contracts would decide whether 61 deals with private companies, including Nikanor and Freeport-McMoRan Copper & Gold should be reviewed or ended, chairman Alexis Mikandji said on Friday.
First Quantum Minerals, Katanga Mining, De Beers and Moto Goldmines, which also operate in the DRC, said they had not been given notice of any changes to their licences.
"Nikanor has received no official notification of the recommendations of the commission," said Richard Boorman, the company's spokesperson.
"When that changes, we will inform the market."
The company plans to start output at its KOV project by the end of 2009 and reach full production of 250 000 tons of copper a year and 27 500 tons of cobalt in late 2010.
Nikanor, First Quantum and Katanga are seeking to develop copper projects in the country, which has 10 percent of global reserves, after production slumped at the start of the decade because of civil war.
The commission, set up by President Joseph Kabila, is investigating whether licences previously awarded to mining firms are fair to the country.
Nikanor raised £400 million (R5.5 million) this year to help fund construction of its $1.8 billion (R11 billion) mine and signed an accord to sell its output to Glencore International, the world's biggest commodity trader.
First Quantum had received no notification on the status of its licence, said Clive Newall, the company's president.
Katanga's spokesperson David Orford said the firm had not yet been contacted by the government.
De Beers has one joint venture in the DRC, where it had said it had discovered kimberlites, rock formations that contain diamonds. "We've not been informed of anything officially," said De Beers spokesperson Marie-Chantal Kaninda.
Balcatta-based Moto wants to develop DRC's first commercial gold mine. Deputy mines minister Victor Kasongo said in February that Moto risked losing its property, as it had not done any work on it.
"We have not seen any report, officially or unofficially, and are therefore not in a position to comment," said Sam Jonah, Moto's chairman.
The government commission will recommend alterations to 38 contracts and may cancel another 23.
Chief executive of AngloGold Ashanti Mark Cutifani said that his company was awaiting the outcome of the review. - Bloomberg
http://www.busrep.co.za/index.php?fSectionId=&fArticleId=4113969
maquis
Anvil, First Quantum may lose Congo licenses
ReplyDeleteReuters
Posted: Sun, 04 Nov 2007
[miningmx.com] -- This is an updated version of an earlier Reuters story and deletes an erroneous reference to Canada's Banro Corporation, which does not have a joint venture with the state and is not listed as one of the 61 companies under review.
SIXTY-ONE mining contracts under review by a mining commission in Democratic Republic of Congo should be cancelled or renegotiated, according to a preliminary report from the panel seen by Reuters on Saturday.
The document, which a commission member said had not yet been finalised, showed that no contract reviewed by the panel was considered "viable" in its current form.
Thirty-seven contracts, including those with international firms Freeport McMoRan Copper & Gold, BHP Billiton and Nikanor, needed renegotiating while the remaining 24 should be terminated, the document recommended.
The commission was established to bring mining contracts in the vast former Belgian colony, most of which were negotiated during a 1998-2003 war and a subsequent three-year transition period, up to international standards.
"(The document) is the work of a subcommittee and is not the final version of the report. There still could be changes," the commission member told Reuters.
He said the final version of the report should be presented to Congo's Ministry of Mines on Tuesday.
Among those contracts recommended for cancellation are Toronto-listed Anvil Mining Ltd's rights to the Dikulushi copper and cobalt mine, where the Perth-based company has recently launched an underground mining operation.
"The commission notes that the state earns absolutely nothing in this contract and proposes the government end it," the report said among its recommendations.
The panel also called for a 2004 decree authorising the creation of KMT Plc, of which First Quantum Minerals is the major stakeholder, to be repealed.
Mining Code
The commission criticised several mining majors for irregularities in the negotiation of their contracts and recommended they be renegotiated but not cancelled.
Freeport McMoRan's Tenke Fungurume project, negotiated before the company's takeover of Phelps Dodge, was criticised for not respecting Congo's mining code.
"The government should end all these conventions and invite the parties to sign a new partnership conforming to the mining code with the right of pre-emption in favour of the current partner," the report said.
Billiton and AngloGold Ashanti, which are both in joint ventures with state companies, and Nikanor, which has launched a $1.8bn copper project in Congo, were similarly criticised.
Following Congo's first democratic elections in more than four decades last year and a return to relative political stability following a five-year war, interest in the country's vast mining sector is booming.
The government first announced plans for a review of the legality and fairness of mining contracts early this year but the process was not launched until June and the commission's work has been delayed on several occasions.
Upon completion of the evaluation of the mining licenses, the commission is due to begin renegotiating the deals.
http://www.miningmx.com/mining_fin/667520.htm
Bonne journée , Cho.
Maquis
CORRECTED - UPDATE 2-Congo panel says 61 mining contracts not viable
ReplyDeleteSat 3 Nov 2007, 23:48 GMT
(Deletes erroneous reference to Canada's Banro Corporation , which does not have a joint venture with the state and is not listed as one of the 61 companies under review)
By Joe Bavier
KINSHASA, Nov 3 (Reuters) - Sixty-one mining contracts under review by a mining commission in Democratic Republic of Congo should be cancelled or renegotiated, according to a preliminary report from the panel seen by Reuters on Saturday.
The document, which a commission member said had not yet been finalised, showed that no contract reviewed by the panel was considered "viable" in its current form.
Thirty-seven contracts, including those with international firms Freeport McMoRan Copper & Gold Inc , BHP Billiton and Nikanor , needed renegotiating while the remaining 24 should be terminated, the document recommended.
The commission was established to bring mining contracts in the vast former Belgian colony, most of which were negotiated during a 1998-2003 war and a subsequent three-year transition period, up to international standards.
"(The document) is the work of a subcommittee and is not the final version of the report. There still could be changes," the commission member told Reuters.
He said the final version of the report should be presented to Congo's Ministry of Mines on Tuesday.
Among those contracts recommended for cancellation are Toronto-listed Anvil Mining Ltd's rights to the Dikulushi copper and cobalt mine, where the Perth-based company has recently launched an underground mining operation.
"The commission notes that the state earns absolutely nothing in this contract and proposes the government end it," the report said among its recommendations.
The panel also called for a 2004 decree authorising the creation of KMT Plc, of which First Quantum Minerals Ltd is the major stakeholder, to be repealed.
MINING CODE
The commission criticised several mining majors for irregularities in the negotiation of their contracts and recommended they be renegotiated but not cancelled.
Freeport McMoRan's Tenke Fungurume project, negotiated before the company's takeover of Phelps Dodge, was criticised for not respecting Congo's mining code.
"The government should end all these conventions and invite the parties to sign a new partnership conforming to the mining code with the right of pre-emption in favour of the current partner," the report said.
BHP Billiton and AngloGold Ashanti , which are both in joint ventures with state companies, and Nikanor, which has launched a $1.8 billion copper project in Congo, were similarly criticised.
Following Congo's first democratic elections in more than four decades last year and a return to relative political stability following a five-year war, interest in the country's vast mining sector is booming.
The government first announced plans for a review of the legality and fairness of mining contracts early this year but the process was not launched until June and the commission's work has been delayed on several occasions.
Upon completion of the evaluation of the mining licenses, the commission is due to begin renegotiating the deals.
© Reuters 2007
Congo Contract Shake-Up Rocks the Mining Sector
ReplyDeleteBy Jane Louis
St. LOUIS (ResourceInvestor.com) -- The long-awaited shake-up in the Democratic Republic of Congo’s mining sector may finally be happening.
A government-appointed panel is due to release its report tomorrow on which mining contracts in the country remain “viable” following the government’s transition after the DRC’s 1998-2003 civil war - but a preliminary report was leaked this weekend, advising that 24 of the 61 mining contracts under review should be cancelled.
The panel began its review of the legality of the contracts in June. The contracts were classified into three categories: those that should be renegotiated, cancelled or remain untouched. The leaked report did not classify any companies as remaining untouched, according to sources.
Permits held by Freeport-McMoRan [NYSE:FCX], BHP Billiton [NYSE:BHP; LSE:BLT], AngloGold Ashanti [NYSE:AU], Nikanor [LSE:NKR] and Katanga Mining Ltd. [TSX:KAT] are included in the 37 contracts classified for renegotiation in the leaked report. Some companies listed were criticized for “irregularities” in licence negotiation and disrespect of the Congo’s mining code.
Several companies said that they had not heard anything officially from the DRC government and pointed out that it is the government - not the panel - that will make a final decision.
Anvil Mining [TSX:AVM; ASX:AVM] lost almost 19% today on the Toronto Stock Exchange on the report’s news that the firm’s rights to the Dikulushi copper-silver mine will be recommended for termination and its contracts with the Mutoshi and Kinsevere-Nambulwa properties will be recommended for renegotiation. The company issued a statement saying that it has heard nothing from the DRC government in regards to the preliminary report.
“Anvil confirmed that it has received no written communication from the Minister of Mines or the commission (or any other government body in the DRC) in respect of renegotiation or termination of any agreement to which Anvil or any of its subsidiaries is a party,” the press release stated.
“Anvil understands that the commission is to report to the Minister of Mines and that the commission is mandated to issue recommendations only and does not appear to have the power itself to renegotiate or terminate any contract. Accordingly, Anvil can offer no comment on whether any of its contractual arrangements in the DRC will actually be terminated or renegotiated. “
Not the First Time…
The DRC is estimated to hold one-tenth of the world’s copper reserves and about one-third of the world’s cobalt. The country has produced as much as 475,000 tonnes of copper a year in the past, although output has decreased in the past 30 years.
Under President Joseph Kabila, the government launched its review of mining contracts earlier this year to make sure all were legal and fair to the state.
In late August, the DRC revoked Central African Mining & Exploration Co.’s copper and cobalt mining licences - essentially knocking out CAMEC’s pending [AIM:CFM] $1.4 billion takeover bid for Katanga.
The DRC stripped London-based CAMEC of its rights to the C19 concession due to “serious irregularities in the original issuing of the licences,” according to a Congolese Justice Ministry press release.
“The judicial decision has been taken to revoke and cancel the licences held for the area known as C19,” the press release read. “The rights to mine the C19 area revert to Gecamines, the state-owned mining company.”
CAMEC maintained that there was “no legal basis” for the revocation and argued that the DRC did not take the proper steps as requires by law to revoke the permits.
An Agreement With the Chinese?
In September, China agreed to loan the DRC government $5 billion for mining and infrastructure projects, including a new Chinese-Congolese joint venture mining company - leading some to speculate that revoked licences will be awarded to Chinese companies.
But Philippe de Pontet, an analyst with the Eurasia Group, told Resource Investor he does not believe a majority of terminated contracts would be handed over to the Chinese.
“I doubt that the Chinese will get a majority of revoked licences,” de Pontet said. “…I doubt it would be more than a handful. I don’t think the Congo wants to alienate Western companies.”
Octagon Capital analyst Hendrik Visagie does not even think any of the major companies will lose their licences. He told RI that he thinks the Congo is using its Chinese connections as a leverage point in negotiations.
“With the Chinese involved in the background, (the DRC) has a much stronger hand,” he said.
Visagie, who noted that he is not an expert on the Congo but an observer, said that he thinks it is likely that the companies ordered to renegotiate will choose to do so and not walk away.
“Ultimately, that’s the only choice they have, right?” he said. “…I think that they’ll have to negotiate.”
Effects on the Copper Market
Copper futures fell to a seven-week low today on the London Metal Exchange, dropping to $7,350 per tonne during midday trading. But the DRC’s decision regarding contracts could turn out to be good news for copper prices, according to Visagie.
“This will just delay the development of copper projects,” he said, which will drive traders to be bullish on both copper and cobalt.
“The world is depending on the Congo production to bring the copper supply and demand into balance,” Visagie told clients in a note.
Many of the miners in the preliminary report saw their share prices drop on today’s news. Anvil led the way, trading 15.38% lower at C$14.75 on TSE this afternoon, while Katanga lost 13.42% to C$11.68. Nikanor closed 4.77% lower at 588.50 pence on the London Stock Exchange. BHP lost 5.25% to $79.33 on the New York Stock Exchange, and AngloGold declined 0.54% to $42.71.
But de Pontet pointed out that the preliminary report will not be the DRC government’s ultimate decision. “This is not the final word,” he said. “The recommendations will not be accepted in total.”
Find a list of the contracts under DRC review as of 21 April 2007 here. (Document in French)
http://www.resourceinvestor.com:80/pebble.asp?relid=37437
http://www.boursorama.com/forum/message.phtml
"First Quantum Minerals, Katanga Mining, De Beers and Moto Goldmines, which also operate in the DRC, said they had not been given notice of any changes to their licences"
ReplyDeleteThis is a powerful collection of mining companies. Interesting that they seem to have sign irregular contracts. You would have thought they had enough legal cover.
DRC govt slams leaked licence report
ReplyDeleteAllan Seccombe
[miningmx.com] -- THE mining licence review process in the Democratic Republic of Congo (DRC) has been damaged by a leaked early draft of the Review Commission's report and the Ministry of Mines expects a large number of the companies operating there will continue to do so once "all irregularities have been corrected", said mines minister Martin Kabwelulu.
Newswires Reuters and Bloomberg have reported on a leaked preliminary draft of the Commission's report, saying 37 of the 61 contracts under review need renegotiating while the other 24 should be terminated.
"The speculation is not based on any official document, but on a leak of an early draft from within the Commission. The government deplores the leaking of this draft and the uncertainty that it has understandably created," Kabwelulu said in a statement.
Shares in companies operating in the DRC have fallen sharply since Friday as investors took fright on the leaked news.
"The review process has been damaged by this grossly misleading leak of information, but the DRC remains determined to manage the license review responsibly and to the benefit of all responsible companies," Kabwelulu said.
“It is expected that, after all irregularities have been corrected, the great majority of companies currently in the DRC will remain in the country for the long term. This has been and will remain the position of the government.”
Metorex, which has the Ruashi project in the DRC copperbelt, called the leaked report an "unauthorised breach of protocol", said CEO Charles Needham.
"The report of the Commission still requires discussion and amendment prior to presentation to the government and release by it," he said.
Other companies have said they would wait until the official report into their licences before commenting.
"The fact the report was leaked was bit of a surprise. The market hates uncertainty. It maximises the problem for the DRC," said Clive Newell, president of First Quantum.
The government launched the review process to ensure the contracts agreed during a six-year war, which ended in 2003, and a three-year transitional government period are above board.
http://www.miningmx.com/mining_fin/668936.htm
There is nothing sinister in Congo review - Charles Needham, CEO, Metorex
ReplyDeleteIn an interview on ClassicFM @ 18:00 on Tuesday, 6 November 2007
[miningmx.com] -- THERE was nothing sinister about the Congo government’s mining license review programme, said Charles Needham, CEO of Metorex which owns the Ruashi project in the central African country.
“The review process has been going on for some time,” said Needham who was speaking on Classic Business, a week night radio programme. “We do understand what they are doing, and there is absolutely nothing sinister about the process”.
Needham’s comments follow several days of high controversy in the Congo after news agencies Bloomberg News and Reuters published details of a leaked document detailing recommendations of a mining license review commission.
The commission said a large number of mining contracts had to be renegotiated while others were sound. Some mining contracts would be repealed, the commission said – a development that was strongly dismissed today by the Congo government. It said the commission had no executive powers.
“We are very confident that the review process will go smoothly,” said Needham. “The group in charge of the process consists of government officials and parliamentarians. I believe they would look at it in a responsible manner.”
Commenting on the company’s business in the Congo, Needham said Metorex’s joint ventures were vetted by all the necessary mining regulations. “Our Ruashi project went through all that and was signed by the mines minister,” said Needham.
Metorex also announced today it would buy shares in Copper Resources Corporation (CRC) it didn’t already own, a development that underpinned the firm’s confidence in the Congo.
“We believe in buying long-life, high quality mines. CRC has a high quality ore body and it fits into the equation,” said Needham. Metorex currently has a 39% stake in CRC.
http://www.miningmx.com/radio/669760.htm
SAD AND DEPRESSING
ReplyDeleteBehind the DRC mining contracts review
At least 14 listed stocks could be seriously impacted by dubious Kinshasa-related leaks.
Author: Barry Sergeant
JOHANNESBURG -
Whether orchestrated or not, leaks directly and indirectly from Kinshasa over draft recommendations on the Democratic Republic of the Congo's mining review put a minor panic into potentially exposed stocks in the latter trading days of the past week. Some DRC-related stocks fell by up to 9% on Friday, with Africo (ARL.TO, C$2.32 a share), which owns the disputed Kalukundi deposit, leading the losses.
Following overwhelming evidence, most of it sad and depressing, some 60 DRC mining concessions were put into a review in an official list dated April 14 2007. While it is no secret that the mining review is far from complete, rumours latterly fed into the market indicate that none of the contracts are going to survive without re-negotiation. The figures don't add up, but it's said that 37 contracts will have to be re-negotiated, while 24 are set for termination.
Whether these clearly premature numbers have been spat out by the efforts of various influences will be a major source of speculation for months to come. It's no secret that certain DRC officials (and certain private sector individuals) are keen to progress a promised $5bn investment from Chinese sources, by settling certain DRC mining interests in return. On the other hand, within the private sector, high level battles continue over titles to the fabulously rich mineral resources found across the DRC, a country the size of Western Europe.
Over the past decade, the DRC has encountered instability of such magnitude that millions, according to various NGOs, have died from unnatural causes. For years the country has hosted MONUC, the UN's most expensive single-country operation. Given this background, the vast majority of mining deals currently found in the DRC can easily be questioned.
In a July 18 2006 report to the UN's Security Council, the Group of Experts on the DRC raised serious questions over concession rights held by individuals of unknown or questionable standing. Noting that the DRC's Mining Cadastre listed 2144 mining and quarrying concessions, the Group of Experts argued that "an undetermined number appear to be held by concessionaires affiliated with investors whose personal and professional integrity is doubtful".
This lack of transparency, the Group of Experts argued, provided "hiding places for sanctioned individuals, financiers of embargo violators and for other individuals who simply do not meet the standards of the Code Minier". As an example of a "due diligence failure", the report referred to Camec (LSE: CFM.L, £0.29 a share), and noted that Conrad Muller "Billy" Rautenbach, a major shareholder in Camec, was wanted by the authorities of South Africa for fraud and theft. Rautenbach had ostensibly sold Boss Mining (concessions 467 and 469) and also concessions 1590-1605 to Camec.
As a further example of a due diligence failure, the report also referred to Ruashi Mining (concessions 627, 578, and 72), noting that Niko Shefer, "ex-convict and currently indicted by the authorities of South Africa, is the controlling shareholder of Ruashi Mining". Under cover of layers of entities, including Sentinelle Global Investments, Shefer "sold" Ruashi to Metorex (JSE: MTX, R28.20), and later realized benefits to the tune of around $400m, according to individuals familiar with the situation.
The Camec and Metorex concessions are clearly among the most vulnerable in the DRC: Camec is already fighting its case in the courts of Lubumbashi, the capital of Katanga Province, host of the DRC's copper-cobalt riches. Camec's would-be concessions can be traced back to the DRC's 1997-2003 war, under the Zimbabwe military's notorious Operation Sovereign Legitimacy (Osleg). For its part, Metorex has steadfastly refused comment of any kind on the quality of title of its Ruashi concession, now the group's major money spinner.
The cases for many other DRC mining concessions are better looking. In April this year, a memorandum by DRC mines minister Martin Kabwelulu effectively resuscitated the controversial commission report by Christophe Lutundula, filed in mid-2005. The Kabwelulu memorandum made it clear that no mining contracts would be "annulled".
Lutundula, an experienced politician from the opposition, was appointed as chairman of a commission into mining contracts; work started at the end of May 2004, and focused on investigations into selected mining contracts signed between 1996 and 2003. The final report was deposed at the Bureau of the National Assembly in June 2005, where it lingered.
Even after Lutundula filed his report in mid-2005, the DRC government dished out a series of concessions involving giant mining assets in Katanga and the Kasaï. Katanga Mining's (KAT.TO, C$13.4) Kamoto agreement was ratified by presidential decree on August 4 2005; Nikanor's (NKR.L, £6.18) titles were similarly ratified on October 13 2005, and the Tenké Fungurumé agreements on October 27 2005.
Another presidential decree in October 2005 confirmed three memorandums of agreement of diamond parastatal Société Minière de Bakwanga (MIBA) with three private companies, De Beers, DGI Mining, and Nizhne-Lenskoye, apparently concerning mining licenses for a massive surface area of more than 35 000 square kilometers.
Today Tenké Fungurumé is 24.75% held by Lundin Mining (LUN.TO, C$11.50), 57.75% by Freeport McMoRan (FCX, $112.80), with the balance of 17.5% in the hands of La Générale des Carrières et des Mines (Gécamines). Tenké Fungurumé is under construction, with commercial production planned for the first half of 2009.
Tenké Fungurumé is a greenfields operation; Katanga Mining's Kamoto and Nikanor's KOV are brownfields, to which Katanga Mining and Nikanor have committed $424m and $1.8bn, respectively, in redevelopment finance. Freeport McMoRan recently stated that capital costs at Tenké Fungurumé had increased to $900m from $650m previously, reflecting various inflationary pressures and scope changes. Some $157m in capital costs had been incurred through September 30 2007.
Senior mining groups such as Freeport McMoRan rely on legislative and multiple other certainties before committing to huge projects, and display the highest standards of corporate governance. In much the same vein, it's unthinkable that the various DRC exploration concessions held by BHP Billiton (BLT.L, £17.55) are anything but proper. The same can be said of the exploration concessions held by Gold Fields (GFI, $17.76) and the more advanced interests AngloGold Ashanti (AU, $42.94) holds in the DRC's far north east. Similar positive comments can be articulated for First Quantum (FM.TO, C$93.95), the most experienced listed miner on the adjoining DRC and Zambia copper belts.
There is no question, however, that a good number of DRC concessions are rotten to the core. The final outcome of the DRC mining review is going to have a major impact on the country's standing as to its quality as an investment destination. In a recent investment rating risk by Chubb regarding resource rich countries, the DRC ranked a lowly 25th of 32 possible positions.
In practice, it's going to be difficult to shove all the blame on the private sector. The Lutundula commission noted that the likes of Gécamines "approved joint ventures whose objective is to create new companies with private partners, which, in other words, contributes to their own disappearance". In some cases, the commission argued, "the management committees of the public enterprises that initiate and proceed with negotiations - in which the Kinshasa authorities interfere a lot - lack transparency, collaboration and cohesion".
There is ample evidence of various peccadilloes by both private sector and public sector interests. Earlier this year, for instance, Moto Gold Mines (MGL.TO, C$2.86) was known to some specialist investors as the world's hottest gold stock.
But it seemed inevitable that the stock would run into some kind of trouble for outlining nearly 20m ounces of gold resources in the far north eastern part of the DRC, in Orientale province, just outside the Ituri "province", after the proclamation of James Kazini, a warlord, in 1999. Today, Moto Gold rates as one of the worst performing gold stocks in the world, following various spats with various individuals connected, directly or indirectly, with DRC parastatal Okimo (L'Office des Mines d'or de Kilo-Moto).
Selected DRC-exposed stocks
http://www.mineweb.co.za/mineweb/view/mineweb/en/page36?oid=39266&sn=Detail
The government launched the review process to ensure the contracts agreed during a six-year war, which ended in 2003, and a three-year transitional government period are above board.
ReplyDeleteSomeone should launch a review process to see if Zambia's mining agreements are above board.
There is no question, however, that a good number of DRC concessions are rotten to the core. The final outcome of the DRC mining review is going to have a major impact on the country's standing as to its quality as an investment destination.
ReplyDeleteTough.
In a recent investment rating risk by Chubb regarding resource rich countries, the DRC ranked a lowly 25th of 32 possible positions.
Low in whose interest. The mining companies? Or the people of the countries in question.
African legislation still hinders foreign investment
ReplyDeleteBy: Esmarie Swanepoel
Published: 9 Nov 07
In October, Mining Weekly reported that resource-rich Zambia plans to raise the mineral royalty to 3%, from 0,6%. Zambia Chamber of Mines executive director Fred Bantubonse said plans to increase the mineral royalty and corporate tax to 35% from 30% might affect fresh investments from bigger global players in the copper industry, if it was not carefully handled.
Multidisciplinary construction consultancy MDA Consulting director Euan Massey says the increase in the mineral royalty was most likely caused by an increase in resource prices over the last three years. He states, however, that mining houses already operational in Zambia will continue to make a profit.
Massey says that although several countries in Africa are offering incentives for foreign investment, it would be more profitable if legislation governing import and export permits, work permits, and mining, would become properly regulated. �€œIf the individual governments in Africa could have those legislations regulated properly, and have them accessible to international mining companies and contractors, it would be a lot easier to contract in those countries.�€
He adds that there are a number of difficulties related to contracting in Africa, since the continent contains several differing legal systems. �€œThe South African legal system is based on the common law legal system, so it is fairly easy for South African companies to contract in other common law legal systems because they appreciate the fundamental elements.�€
Other countries in Africa, however, are based on a codified legal system in which a specific portion of the law relates specifically to construction. The legislation gives time periods in which parties are to notify claims, and is conditional on security supply. �€œIn these countries, you find that contracting companies have entered into contracts that agree to certain specifications, but some of the specifications are superseded by the law.�€
Another difficulty related to mining and contracting operations in Africa, says Massey, is the antiquity of some of the legislation. �€œSome of these legislations, such as the health and safety legislation in Kenya, were promulgated in the 1950s or 1960s. [They are] outdated, and this causes a problem.
�€œObvious difficulties also include political instability. In countries experiencing political instabilities, there is a higher risk profile involved.�€ Massey says foreign investors usually have risk guidelines to which a project would have to comply, and this would include political risk and payment risk. �€œA lot of resources are owned by joint ventures between governments and large mining houses, or are owned by a mining house. �€œIf an international company is contracting a reputable local company and a semireputable government, they are usually satisfied that the political risks can be negated.�€
He adds that foreign mining companies should consider access to the resource in terms of developing the capital assets, and to look at suitable contractors, especially for the sub- Saharan region. �€œAs you go north of the equator, you have access to a wider variety of international contractors. However, most of the contract work done in sub-Saharan Africa is done by South African contractors. �€œThe problem with this is that the local eco-nomy is currently experiencing a boom, and obtaining a contracting company could be difficult because they are all so busy.�€
Massey says that one of the things mining companies can do to attract contracting companies is to make the offer more appealing, not just from a monetary point of view, but from a risk point of view. �€œFirstly, the rates of the contract price have to be attractive, but then the risk and contracting model that is used also has to be reput- able. The engineering, procurement, and construction management contracts are becoming quite attractive because the risk is shared between the contractor and the mining houses.
�€œAfrica is going to experience growth in the next few years, but unless legislation changes radically, the growth in Africa is not going to benefit African countries. Instead, it will benefit international companies, as it has for a long time.�€
Mozambican national mining director Fatima Momade said in October that the country wants to double new mining investments to $410-million in the next five years. �€œWe are aiming for major investments in gold, coal, copper, tanzanite, and heavy sands exploration,�€ she said.
The aim is to boost economic growth by fast-tracking mining licences. She states that 50 companies invested about $203-million in prospecting and exploration between 2006 and the first half of 2007.
The government will fast-track the issuing of licences to companies as an incentive creat- ing an estimated 20 000 jobs, and hopefully drawing some of the 72 000 miners working in neighbouring South Africa back to Mozam-bique. �€œThe mining sector has potential, but remains underdeveloped. We want to boost the industry and create more jobs.�€
Edited by: Laura Tyrer
http://www.miningweekly.co.za/article.php?a_id=119754
Shady dealings in Congo's mining sector
ReplyDeleteBlogged by: Megan Rowling
Mining contracts in Democratic Republic of Congo aren't exactly known for their transparency. Neither - as the events of the past few days have emphasised - is the process kickstarted in June to review the legality and fairness of those contracts.
Early this week, the share prices of some international mining companies with operations in Congo fell after the leak of a preliminary report from a government-appointed panel recommending that 61 contracts should be cancelled or renegotiated.
Most of the contracts under review were negotiated during Congo's 1998-2003 war and a subsequent three-year transition period, and the mining commission was established to bring them up to international standards.
The government tried to repair the damage from the leak, saying the document seen by media wasn't official but rather an early draft produced by the commission. The mines minister said most companies would be able to carry on operating in Congo in the long term once any irregularities unearthed by the review had been corrected.
The final version of the report was due to be presented to the government on Tuesday, and a technical director at a state-run mining company called Cadastre Minier told Dow Jones the ministry would make a decision on the mining licenses by the end of the month. He said a final report would be released after that.
International and Congolese campaigners called this week for the commission's official report to be released without delay "in order to put an end to the uncertainty and suspicion which are tarnishing the mining sector and to enable all concerned to respond publicly". But so far their appeal has received no response, and it's far from certain that any report the government eventually makes public will be the one submitted to it by the commission.
A press release from the coalition of non-governmental groups said the leak had been "motivated by various pressures on the commissioners to change certain elements of the report", and a police investigation launched into its source.
Carina Tertsakian, a campaigner on Congo for advocacy group Global Witness, told AlertNet that the members of the panel had come under huge pressure from business, including multinationals, as well as the government. But the review process still had a chance of making a difference.
"It could have a major positive effect if it's done properly, in terms of establishing a stable business environment," she said. "But if it's the opposite, it could be negative - business as usual, more of the same corruption and deals done behind closed doors."
This week's international appeal also urged the authorities to make public the measures they will take to follow up the commission's recommendations and the rules that will govern any renegotiation of mining contracts.
At the beginning of October, Global Witness published a briefing calling for greater transparency in the review, as well as the establishment of an independent body to oversee the process. These recommendations have yet to be followed - nor have others urging wider consultation with civil society.
The main focus of the review has reportedly been on the allocation of financial benefits between the state and the private sector. Perhaps not surprisingly, the social and environmental impacts of the mining operations for local populations have come lower down the agenda.
The coalition of groups behind this week's international appeal argues that if Kinshasa isn't willing or able to take firm action to remedy any serious illegalities uncovered by the mining commission, other governments of countries where implicated multinationals are based should hold the companies to account.
"Ensuring a lasting peace, reconstructing the country, and alleviating poverty all depend to a large extent on the success of this process," the statement concludes
http://www.alertnet.org/db/blogs/20316/2007/10/8-192942-1.htm
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